Why Trading Losses?
Every great trader and investor, and especially every bad trader and investor, has losses.
The difference between being a successful trader/investor and a failure is that we successful people know how to deal with these losses. I would like to express my views as to how to avoid the losses.
I will keep it simple and free from technical terms. (One can be profitable without them)
Trading losses happen for two reasons:
- Wrong Trade:
- when the price movement goes against you. No fault of yours, things can go wrong even for the best prepared and knowledgeable.
- Not taking enough profit from the Right Trades:
- When the price movement has favored you, do not run away by taking a small profit. Let the market give you what is due to you. Keep trailing stop losses to save you from sudden reversal.
Knowing how traders suffer losses is no rocket science. Everyone who has suffered the pain of losses actually knows the reason. The question is:
What To Do To Avoid Losses And Make Profit? :
Whether you are a day trader or positional trader, always work with a stop loss. Getting hit with a stop loss looks bad when it occurs, but actually is a life saver for the trader.
”It is like the safety net for the trapeze artist in a circus. It prevents breaking of bones of the trader and keeps him bouncing for the next act meaning next trade.”
You have to develop that mindset of waiting when in profit. That is the real trading mindset!
”So you have to Sit Tight When Right.”
Do not trade in many stocks at same time without understanding their price movements.
For Indian Markets, for a new trader, it is advisable to focus on NIFTY only initially to learn the ropes. After that add other stocks to your list for watching, understanding and subsequently trading.
Apart from the above key points, one should further follow these rules:
(a) Do not be distracted by the views being expressed on business channels.
(b) Do not be influenced by the experts. They can go wrong and mostly do.
(c) Have confidence in your trade, but no over confidence. When in profit, keep moving the stop loss.
(d) Have fun and enjoy trading. That will take the stress out of it.
For me, sitting tight when right, has worked most of the time. And I do not trade unless I have observed its price movements over a period of time.
‘’Observation is the key skill of Trader’’
Watch my daily NIFTY observation levels for identifying daily trends !